Cost of FAA Shutdown Could Exceed $1 Billion: LaHood

CNBC.com and wires

Published 12:00 PM ET Tue, 2 Aug 2011
The Associated Press

Getty Images

Airplane

Continued inaction by Congress will cost the U.S. more than $1 billion in tax revenue and has already cost 70,000 construction jobs and 4,000 jobs at the Federal Aviation Administration, Transportation Secretary Ray LaHood told CNBC Tuesday.

"We’re right smack dab in the middle of construction season. There are 70,000 workers off job sites today because Congress can’t get their act together and can’t compromise," he said.

The holdup is a product of a quarrel between Senate Democrats and House Republicans who are demanding a $16.5 million cut in rural air service subsidies known as essential air service, or the money that’s paid small airports so planes can fly in and out.

The shutdown lifted the requirement for airlines to collect certain ticket taxes, resulting in a loss of $250 million in revenue so far that would have gone to a trust fund that helps pay for airport infrastructure projects. A shutdown through August would raise that total to more than $1 billion.

LaHood blasted conservatives who belied their own rhetoric by not acting on the FAA's funding during the debt-ceiling negotiations.

"If this is not resolved there’ll be $1 billion in taxes that aren’t collected," LaHood said. "So for all these conservative politicians who are worried about the debt and deficit, $1 billion in taxes will not come into the coffers if this continues…That isn’t the way to create revenue, in my opinion."

In addition, "this is a time when we hear politicians talking a lot about creating jobs. Well, this is not the way to create jobs by laying off 70,000 construction workers."

The FAA's long-term operating authority expired in 2007. Since then, Congress has been unable to agree on a long-term funding plan. The agency has continued to operate under a series of 20 short-term extensions.

The latest extension expired at midnight on July 22 after Senate Democrats rejected a temporary extension bill passed by the House that contained the subsidy cuts. Senate Republicans blocked a Democratic extension that didn't include cuts.

The Senate, with the federal debt crisis resolved, is expected to leave by the end of the week for its August recess. The House has already left. Unless the Senate accepts the House bill, lost revenue from uncollected airline ticket taxes could exceed $1.2 billion before lawmakers return to work a month later, senators said.

"This is not a lost cause," LaHood said. "I am asking Congress to pass the bill today. Congress is still in session."

The lost ticket tax revenue is costing the government an estimated $200 million a week. Besides the furlough of the 4,000 employees, the FAA has issued stop-work orders on more than 200 construction projects.

Air traffic controllers have remained on the job and LaHood stressed safety hasn't been compromised. "This has nothing to do with the safety of the flying public," he told CNBC. "Thousand of people are flying safely."

The Associated Press contributed to this report.

To view this site, you need to have JavaScript enabled in your browser, and either the Flash Plugin or an HTML5-Video enabled browser. Download the latest Flash player and try again.